That works out to $24 per share in cash for iPCS. This is a 34 percent premium over the company’s closing price of $17.88 per share on Friday, but perhaps a small price to pay for putting an end to the two iPCS lawsuits–one over Sprint’s acquisition of Virgin Mobile, the other over its investment in Wimax operator Clearwire.

As a result of the iPCS deal, Sprint (S) will no longer be required to divest its iDen network in certain iPCS (IPCS) territories, though iPCS had won a court ruling requiring Sprint to do so. Now, Sprint will not only keep those assets, it can peddle their services to some 700,000 iPCS customers in a territory that covers 81 markets in seven states.

Below, the official announcement:

Sprint Nextel to Acquire Wireless Affiliate iPCS, Inc.

More than 700,000 PCS Wireless Users and 270,000 Wholesale Customers to Become Sprint Direct Subscribers
Extends Company’s Direct Service Territory to an Additional 12.6 Million People
Sprint Ends Plan to Divest iDEN Network Assets in Certain Midwestern States Pending Transaction Close
OVERLAND PARK, Kan. & SCHAUMBURG, Ill.–(BUSINESS WIRE)–Oct. 19, 2009– Sprint Nextel Corp. (NYSE: S) and iPCS, Inc. (NASDAQ: IPCS) today announced an agreement for Sprint Nextel to acquire iPCS for approximately $831 million, including the assumption of $405 million of net debt. This transaction value represents 6.4x projected 2010 Adjusted Earnings Before Income, Taxes, and Depreciation (“Adjusted EBITDA”*). Sprint expects to achieve approximately $30 million of synergies annually in the transaction and expects the transaction to be free cash flow accretive to Sprint in 2010.

Under the terms of the agreement, Sprint Nextel will commence a cash tender offer to acquire all of iPCS’ outstanding common shares for $24.00 per share. This price per share represents a 34 percent premium to iPCS’ closing stock price as of October 16, 2009. The agreement also requires a minimum of a majority of the shares outstanding (on a fully-diluted basis) to be tendered in the offer. Following completion of the tender offer, any remaining shares of iPCS will be acquired in a cash merger at the same price per share. Shareholders with approximately 9.5 percent of the outstanding common shares of iPCS have already agreed to tender their shares pursuant to the tender offer and to vote their shares in favor of the merger.

The acquisition is subject to customary regulatory approvals and other customary closing conditions, and is expected to be completed either late in the fourth quarter of 2009 or early 2010. As part of the agreement, Sprint Nextel and iPCS will seek an immediate stay of all pending litigation between the parties with a final resolution to become effective upon closing of the acquisition.

As a result, Sprint will no longer be required to divest its iDEN network in certain iPCS territories and will terminate its previously announced divestiture process pending closing of the transaction.

iPCS’s services are sold under the Sprint brand name and in Sprint-branded stores. Because of the nearly seamless marketing and sales relationship between Sprint and iPCS, customers should not experience any change in their service as a result of this transaction.

“Acquiring iPCS brings added value to Sprint by expanding our direct customer base, growing our direct coverage area and simplifying our business operations,” said Dan Hesse, CEO of Sprint Nextel. “Customers in iPCS territory will see a seamless transition and continue to enjoy a superb customer experience.”

“We are very pleased to have reached this agreement with Sprint Nextel. Given the increasingly competitive landscape, we believe this is an opportune time to provide our shareholders with a liquidity event at a very attractive price. iPCS shareholders will receive a significant and immediate premium for their shares and our customers will continue to receive the same excellent service from the same dedicated people who provide that service today,” said Timothy M. Yager, president and CEO of iPCS. “We look forward to working with the Sprint Nextel team to ensure a smooth completion of the transaction and transition in the coming months.”

This morning, Sprint Nextel said it will acquire Virgin Mobile USA in a $483 million stock deal that will give the company a clear lead in the prepaid arena, where low prices are becoming ever more popular with consumers beaten into submission by the continuing recession.

For Sprint (S), which already owns 13.1 percent of Virgin Mobile and which allows the mobile virtual network operator to use its network, this is a wise move. It brings to the company some five million customers who are already using its network, and more than doubles the size of its prepaid business, Boost, which has recently had quite a bit of success.

“The acquisition of Virgin Mobile USA positions Sprint for even greater success in the prepaid wireless segment,” Sprint CEO Dan Hesse said in a statement. “Prepaid is growing at an unprecedented rate with consumers keenly focused on value. Virgin Mobile is an iconic brand in the marketplace that will complement our Boost Mobile brand.”

That said, the deal is not without its difficulties, as Bernstein analyst Craig Moffet explained in a research note this morning.

“The acquisition nudges Sprint further along in its metamorphosis into a prepaid and wholesale operator,” he wrote. “However, this deal, and the strategy shift in general, does nothing to address the key issue that Sprint faces, namely the continuing meltdown of its much higher value postpaid business. Closing the deal and integrating Virgin may consume management’s time and distract them from what should be their primary focus.”

“We still have a backlog of subscribers but it’s not unmanageable and we get shipments every week. We’ll be short for a while but we’re catching up.”

– Sprint Nextel CFO Bob Brust, June 24, 2009

[This post was updated at 12:36 with comment from Sprint.]

Sprint best step up its marketing efforts for the Pre because according to Pali Research, demand for Palm’s new device is slowing, and quickly.

During the week ending June 26, Pali estimates that Sprint sold 50,000-60,000 Pre handsets. In the weeks that followed, Sprint sold “less than 40,000,” and then, “over 30,000”–again, according to Pali. Now the research outfit says Pre sales have declined by another 5,000 units.

“We really aren’t sure what Sprint is waiting for in stepping up the ad campaign but Palm Pre sales have continued to slow over the past two weeks and we believe Sprint is currently selling roughly 25,000 per week, down from over 30,000 two weeks ago and over 50,000 in late June,” Pali analyst Walter Piecyk said in a research note this morning. “Advertising could increase in the coming weeks but we are headed into August and there is a new BlackBerry now vying for the attention of wireless customers.”

And don’t forget that $99 Apple iPhone 3G.

Piecyk concludes by suggesting that Sprint (S), by failing to market the hell out of the Pre, is fumbling the best opportunity to come its way in a while.

“Slowing sales cannot be helping CEO Dan Hesse’s ability to extend the exclusive period for the Pre as Palm (PALM) likely views a Verizon launch as something that could materially stimulate sales,” Piecyk said.

“Hesse has never been one to resort to price cuts but we wonder if dropping the Pre to $99 could reignite sales,” the analyst continued. “…Sprint’s future is certainly not tied to the Pre but this is a great product that could highlight their data network. We believe they are squandering this opportunity over the past few weeks. Sprint is still not in a strong enough position to let good opportunities pass them by.”

And what does Sprint think of that assessment? Not much. Reached for comment, a spokesperson told me: “we are very pleased with the performance of the Pre and the excitement it’s drawn; we are selling all the quantities that are being delivered to us and we are ramping up advertising this month — did you see the full-page ads this week comparing the value and performance of the Pre to the iPhone? — and we are expanding availability of the handset at Best Buy, Radio Shack and online, with future expansion of availability planned. As Dan Hesse noted in California today, it takes a number of months — through a whole ramped-up sales cycle — to determine the real performance of a handset in the marketplace. Folks like to speculate and toss around ideas on the internet all the time, but the truth is Sprint is very happy with how the Pre is doing.”

Indeed. Because while Sprint (S) offset many of those postpaid defections with big gains in the prepaid and wholesale markets–the company lost only 182,000 subscribers, net, thanks to additions from Boost Mobile and to its partnership with Amazon (AMZN) for the Amazon Kindle–postpaid subscribers are the industry’s most valuable. They usually spend more on their service, and because they’re typically bound by contract, they’re less likely to cancel service as customers who aren’t. So, the fact that Sprint’s postpaid subscribers have been fleeing the company in droves for six straight quarters is not a good sign. That said, this is the the largest quarter-to-quarter improvement in net customer additions at Sprint Nextel in recent memory (click on chart below), so things are improving, if only a bit.

Sprint posted a loss of $594 million or 21 cents per share in its first quarter, a decline of 18 percent, compared with a loss of $505 million or 18 cents per share for the same period a year ago. Revenue was $8.21 billion, down about 12 percent, and a fair bit less than the $8.28 billion analysts had been expecting.

One hopes the debut of Palm’s (PALM) new Pre handset in the months ahead will do something to change that.

“Labor reductions are always the most difficult action to take, but many companies are finding it necessary in this environment,” Sprint CEO Dan Hesse said in a statement announcing the layoffs. “We continue to improve the customer experience, and these improvements are reflected in much higher levels of satisfaction in customer surveys and in independent performance tests. Our commitment to quality will not change.”

Yeah, well, your commitment to quality might not change, but quality itself certainly will. A 14.3 percent reduction in workforce isn’t likely to improve Sprint’s customer experience, now is it?

“It’s a difficult industry in which to shrink your way to greatness,” said Stifel Nicolaus analyst Christopher King. “Investors would much rather see the company growing this business, hiring people.”

With the launch of the Pre approaching, Palm surely would as well.

[Image credit: MSN Money]

Still, it sounds promising. With downlink speeds in the 2-4Mbps range, Xohm is about twice as fast as current cellular broadband networks. Sprint’s service plans include a $25 monthly home subscription, a $30 “on-the-go” plan and a $10 day-pass program. All three require a PC card or modem and a subscriber agreement permitting Xohm to “use various tools and techniques designed to limit the bandwidth available for certain bandwidth-intensive applications or protocols, such as file sharing.”

So much for that “open network” promise. Well, at least Xohm is up and running, right? Sprint Nextel (S) first announced plans to deploy a nationwide WiMax network in August 2006.

The bottom line is texting is at least four times more expensive than transmitting data from Hubble, and is likely to be substantially more than that.

– University of Leicester space scientist Nigel Bannister

If wireless providers applied the per-byte pricing scheme they use for SMS texting to other data transmitted over their cellular networks, it would cost nearly $6,000 to download a single 4MB song. Yet the price of text messaging has doubled industrywide in the last three years.

Why?

A good question. And one that’s finally being asked by Congress. On Tuesday, Sen. Herb Kohl (D., Wis.), chairman of the Senate Judiciary Antitrust Subcommittee, sent letters to Verizon Wireless (VZ), Sprint-Nextel (S), AT&T (T), and T-Mobile (DT) asking them to justify their outrageous text messaging prices. “What is particularly alarming about this industrywide rate increase is that it does not appear to be justified by rising costs in delivering text messages,” Kohl wrote. “Text-messaging files are very small, as the size of text messages are generally limited to 160 characters per message, and therefore cost carriers very little to transmit.”

Kohl noted as well that the companies appear to have changed text-messaging rates at nearly the same time, with identical prices. A troubling coincidence, given that together they serve more than 90 percent of U.S. cellphone users. Said Kohl, “This conduct is hardly consistent with the vigorous price competition we hope to see in a competitive marketplace.”

Makes for great profit margins though …

The ruling comes as the Federal Communications Commission considers regulating ETFs on a nationwide basis.